Does RTP Deliver Demand Response?: Case Studies of Niagara Mohawk - PowerPoint PPT Presentation

Does RTP Deliver Demand Response?: Case Studies of Niagara Mohawk RTP and ~43 Voluntary Utility RTP Programs Charles Goldman Lawrence Berkeley National Laboratory Mid-Atlantic Demand Response Initiative Meeting Baltimore, MD December 10, 2004

Outline of Talk • Case Study of NMPC RTP Tariff – Customer Satisfaction and Choices – Does RTP deliver demand response? – How do RTP and DR programs interact? – Policy Implications • Review of Voluntary RTP Programs

Voluntary vs. Default Service RTP: Overview of Key Design Issues Voluntary Default Objectives Customer retention, load growth, Encourage switching; minimize DSM risk for default service provider Tariff Design Two-part with CBL; day-ahead RTP for commodity with price quotes unbundled T&D charges; real- time price quotes Marketing Targeted to largest customers, N/A often through account reps Customer Occasionally offered by utilities Incorporated into more general Education (e.g., workshops or meetings informational campaigns about with account reps) retail choice Financial Hedging CBL and/or utility-sponsored Potentially offered by competitive Options financial risk mgmt. products retailers Tech. Assistance & Occasionally offered by utilities Potentially offered by competitive DR Technologies retailers

Project Objectives • Characterize customer response to and satisfaction with a RTP tariff in a retail competition environment • Quantify price response • Assess interactions between RTP and ISO/utility DR programs • Provide input to CA and NY regulators/stakeholders developing DR and RTP options

NMPC Market Situation • RTP is the default tariff for the “SC-3A” class (large C/I customers >2MW) since late 1998 • Unbundled charges for T&D, CTC, etc. • Customer Choices for Electric Commodity Service – NMPC Option 1: RTP indexed to NYISO DAM – default option – NMPC Option 2: fixed rate contract – one-time availability at program inception (now expired) – Competitive retail supplier (ESCO) • Several ISO-based DR programs – Emergency Demand Response Program (EDRP): pay-for performance – Installed Capacity (ICAP): reservation payment – Day-Ahead Demand Response Program

Survey Respondent and Population Characterization Customer Survey All SC-3A Characteristics Respondents Customers (53 customers; 60 (130 customers; 149 accounts) accounts) Industrial 40% 32% Business Type Commercial 21% 23% Government/ 40% 46% educational Average monthly 3.0 MW 3.4 MW maximum demand Option 2 9% 18% The survey response rate was about 40%. Industrials are over-represented in the survey sample; institutional customers are under-represented.

Declining Volatility, Increasing Average Prices 120% On-Peak 100% Price Volatility • Similar trends in Off-Peak 80% all NMPC load 60% zones; although 40% prices are 20% somewhat higher 0% Pre-ISO in Capital zone 2000 2001 2002 2003 Pre ISO 2000 2001 2002 2003 (Nov 1998- ISO Prices (Central zone Oct 1999) 80 Average Price ($/MWh) shown here) On-Peak 70 Off-Peak 60 50 40 30 20 10 0 Pre-ISO 2000 2001 2002 2003 Pre ISO 2000 2001 2002 2003 (Nov 1998- ISO Prices Oct 1999) *On-Peak defined as 7am-11pm on weekdays

Customers Have Seen Occasional High Prices Number of Hours at Indicated Prices: Number of Hours at Various Price Levels Summer Weekdays (8 a.m. - 6 p.m.): 1999 through 2003 1999-2003, Summer Weekdays (8am-6pm), Capital zone $0.07-0.10 720 Prices greater than $0.15/kWh $0.30-0.40 $0.20-0.30 18 720 37 $0.40-0.50 18 $0.10-0.15 2 298 2 $0.001 - $0.05 37 $0.051 - $0.070 298 >$0.50 16 16 $0.071 - $0.100 $0.101 - $0.150 137 >$0.1 137 1,397 $0.151 - $0.200 5 $0.201 - $0.300 $0.05 $0.301 - $0.400 1,397 64 728 $0.401 - $0.500 Unresolved -0.07 > $.500 Are these $<0.05 $0.15-0.20 prices likely 728 64 in CA? Prices greater than $0.15/kWh • 137 hours over 4 summers with prices above $0.15/kWh • Prices exceeded $0.50/kWh for 16 hours

Customer Satisfaction and Choices

Survey Respondents’ Satisfaction 30 Number of Customers 25 N=48 20 15 10 5 0 1 2 3 4 5 Completely Completely Dissatisfied Satisfied Customer Satisfaction with 1998 Redesign of SC-3A • Customers are relatively satisfied with the tariff • Interviews reveal greater disappointment with limited offerings by competitive retailers

Supply Choices of SC-3A Population (December 2002) NMPC Option 1 Late 2004 Update: (default) N=141 57% • >60% of customers have now switched to NMPC competitive suppliers Residual Power: Option 2 - 29% NMPC Option 1 Competitive 10% • Driven in part by - 71% Competitive Supplier sunset of Option 2 Supplier 33% hedge • 53% of SC-3A customers indicated that they had taken competitive supply at some time since 1998 • But does switching mean hedged?

Customer Survey: Competitive Supply Arrangements ISO Market Summer 2001 Current Opening (winter (after first price (summer 2003) 1998/99) spikes) Number of customers reporting 44 44 44 Number of contracts that are… HEDGED: Flat Rate 7 3 4 TOU 6 6 6 Volumetric Collar 2 3 1 TOTAL HEDGED 15 12 11 NOT HEDGED: Price Index 2 5 9 NMPC SC-3A(Option1) 27 27 24 TOTAL NOT HEDGED 29 32 33 Trend is away Percent of contracts that are from physical 34% 27% 25% hedged supply hedges Percent with Financial hedge 15% 29% 30% Trend toward financial hedges

Key Findings: Hedging • In 2003, at least 65% of customers were fully exposed to RTP • Why do customers not hedge more? Possible explanations: – Customers are sophisticated – they understand risks and still choose not to hedge – Customers are discouraged – retail market offers are hard to find or too expensive – Customers are not fully aware of the risks – declining volatility in recent years – Customers have chosen not to choose – default RTP service • Tariff Design and Retail Competition – Unbundled RTP tariff design is appropriate for a competitive market structure, so long as there is a robust market for hedges – A utility-offered hedge (e.g., Option 2) is an appropriate transition strategy

Does RTP Deliver DR?

Price Response: What Customers Told Us 30 Number of Respondents N = 52 Commercial Unresolved 25 Government/Education 20 Industrial Do customers 15 make a distinction between RTP price 10 response and 5 responding to ISO- 0 declared Shift Forego Shift and Unable to curtailment events? Forego curtail • 31% say they FOREGO usage (mainly govt/education customers) • ~15% say they can SHIFT from on-peak to off-peak • 54% of survey respondents claim they CANNOT CURTAIL – but 30% of them were enrolled in NYISO DR programs • Customers may make a distinction: – RTP is price response – ISO programs are a call to keep the lights on (civic duty)

Price Response: Estimated Substitution Elasticities 0.6 Average elasticity 0.5 over all customer Elasticity (average and range) 0.4 types: 0.14 0.3 Substitution 0.2 0.1 0.0 0.00 0.11 0.30 -0.1 -0.2 Gov't/educational (N=11) Industrial (N=10) Commercial (N=9) • Large range in average customer elasticities: – Gov’t/educational customers are most price responsive – Industrial sector response is moderate – Commercial sector is unresponsive

How do RTP and DR Programs Interact?

NYISO Demand Response Program Enrollment (2001-2003) NYISO DR Survey All SC-3A Program Respondents Customers (53 customers; 60 (130 customers; 149 accounts) accounts) EDRP 38% 28% (emergency) ICAP/SCR 13% 9% (reliability-capacity) DADRP 4% 1% (economic) Survey respondents were 30-40% more likely to participate in NYISO DR programs than the SC-3A study population

Estimated Aggregate Demand Response: RTP and EDRP EDRP Event Vs Non-Event Days 1000 CC on EDRP CC on EDRP- 900 Summer Non-Event EDRP Event 800 Days (RTP) Event Days 700 Price ($/MWh) 600 500 400 300 200 100 0 0 25 50 75 100 125 Demand Response (MW) • DR potential of SC-3A customers is ~100MW – about 18% of their total maximum demand • SC-3A customers in NYISO Emergency DR program, mainly industrials, provide ~15MW of load curtailment

Do Enabling Technologies Help?

Customer Survey: Technology Adoption 50 Technology Installed before 1998 Energy Efficiency Technology Installed after 1998 40 Number of Respondents Automation Systems 30 Energy None Energy Management Information Control Systems Systems 20 Real-time Peak Load Data Management Access Controls Don't know 10 0 Technology Investments • Technology adoption prior to 1998 was heavily efficiency oriented – reflecting aggressive NMPC DSM expenditures • 45% of customers have invested since 1998 – emphasis toward load management-oriented devices – reflecting NYSERDA program incentives • Customers are not fully aware of response strategies, even when they have equipment